There is not enough margin in this business for companies such as Paytm to become sustainable, said HDFC Bank's Aditya PuriET Bureau | Updated: February 18, 2017, 09:31 IST

Aditya Puri, managing director of HDFC Bank, took a dig at payment wallets such as Paytm, and said “wallets have no future“ and that new banks will have to invest in acquiring new customers, just like the older ones.

“Whether you look at Apple Pay, which is another version of a wallet, or Paytm, or loan.com, but all of them are going to ride on the basic system of a bank, (and) financial services,“ Puri said to a packed audience at the penultimate session of the ongoing Nasscom India Leadership Forum (NILF) in Mumbai, the annual celebration of the Indian information technology services industry.

Further, he said the payment wallets model was not sustainable.

“(The) Wallet proposition as a valid economic proposition is doubtful. There is no money in the payment business. The current loss reported by Paytm was `Rs 1,651 crore and you can't have a business that says pay Rs 500 bill and take Rs 250 cashback, so come up with something else. And if he wants to copy Alibaba, he can't because India's regulators are better,“ Puri said. He added there was not enough margin in the payments business for the wallets to have a future.

“Mr Puri said this in the context of viability of wallets in general, to buttress his point,“ clarified HDFC Bank spokesman Neeraj Jha in a twitter post.

Paytm declined to comment on Puri's remarks. The session, titled “Re-imagine, not re-engineer!“ was a candid conversation between Mahindra Group managing director Anand Mahindra, Puri and NDTV consulting editor Vikram Chandra, and covered a whole range of subjects, from changes in the banking system, to US president Donald Trump, increasing transparency in India, the changing nature of technology in the world and its impact on India.

Puri also said questioning the validity of banks was wrong because “nobody was re-imagining a bank“, but all the innovation, even in the Silicon Valley was being built on top of the banking infrastructure.

India has reached a point where competition is blurring, and there is a secular shift in technologies such as computing, analytics and cloud, which has also brought down the importance of geographical boundaries.

However, talking about the future of new banks, Puri said, “As far as the new banks are concerned, they will have to spend like the old banks on getting customers. It's like making chicken curry without the chicken. Get me the chicken and I will tell you how much competition there will be.“

Supporting Prime Minister Modi's decision to demonetise high value currency, Puri said cash is more expensive to maintain and move around, and that the push towards digital payments has increased transparency and accountability in the system.